MAY 16, 2018

By Vijay Kumar

MALAYSIA has a new Prime Minister, the oldest Prime Minister in the world – 92 year old Dr. Mahathir Mohamad, who has taken over as Prime Minister last week. One of the promises he made in his election manifesto was to abolish GST in Malaysia. GST was introduced in Malaysia from 1 st April 2015 and is currently levied at a uniform rate of 6%. The tax is hugely unpopular and a survey conducted last year revealed inter alia :

- Underestimating the scale of work involved in adapting the IT system to deal with the new tax was costly and time consuming.

- A lot of work had to be done to enhance and upgrade IT systems to meet the complex GST requirements.

- By and large, businesses were required to make significant accounting system adjustments to adequately handle GST compliance.

- As the GST was a business transformation exercise, it required a lot of work translating the GST requirement and applying them in a practical business environment.

- Lack of knowledge regarding tax rules, talent resourcing and IT system readiness are the main areas of concern.

- Trade needs to continue to stay updated both in terms of the changes in GST but also change to their business practices or processes that could impact GST.

- Unfortunately, as it is a transaction tax, there is no rewind button that allows you to go back and fix things.

And in 2018, just three years after GST came to Malaysia, the 92 year oldDr. Mahathir promises to abolish GST and he becomes the Prime Minister after a gap of fifteen years. And his Government is keen to fulfil the promise within 100 days.

It cannot be said that the old doctor became the Prime Minister just by his promise to abolish GST, but that could be one of the strong factors that helped him to come back to power.

In India, of course, GST is not an electoral issue, as has been proved in the recent elections. We have abundant patience and are capable of absorbing any tax terrorism.

GST and the 15th Finance Commission:

The Notification issued by the president constituting the 15th Finance Commission, stipulates (among other things) that:

While making its recommendations, the Commission shall have regard, among other considerations, to:

The impact of the GST, including payment of compensation for possible loss of revenues for 5 years, and abolition of a number of cesses, earmarking thereof for compensation and other structural reforms programme, on the finances of Centre and States;

The Commission may consider proposing measurable performance-based incentives for States, at the appropriate level of government, in following areas:

(i) Efforts made by the States in expansion and deepening of tax net under GST.

The Kerala Finance Minister Thomas Issac is not impressed. In an open letter to Finance Ministers of all States, he states,

The goods and services tax (GST) has further worsened vertical devolution due to the 50:50 sharing of taxes. You just read the ToR with respect to the GST where it is made out that the GST is going to adversely affect Central resources. The whole argument of an asymmetric GST burden is a joke .

The Kerala Finance Minister got a surprising support from the former Finance Minister P. Chidambaram who tweeted,

Kerala FM's open letter on the ToR of the Fifteenth Finance Commission deserves support. I urge all State CMs and FMs to join hands to protest the Centre's attempt to violate the Constitution and wreck the federal system.

Please also see Alter Finance Commission's TOR by invoking CCSR reports  

When will the Rip Van Winkleism stop and Union of India wake up to its duties and responsibilities to the justice delivery system?

Though this is not a case related to tax, I would like to extract here certain sentences from a judgement of the Supreme Court delivered a few weeks ago.

- The couldn't-care-less and insouciant attitude of the Union of India with regard to litigation, particularly in the Supreme Court, has gone a little too far as this case illustrates.

- To ensure that the Union of India is far more circumspect, costs of Rs.1,00,000/- were imposed and it was observed that the Union of India must shape up its litigation policy. Unfortunately, the Union of India has learnt no lesson and has continued its non-cooperative attitude.

- The Union of India must appreciate that by pursuing frivolous or infructuous cases, it is adding to the burden of this Court and collaterally harming other litigants by delaying hearing of their cases through the sheer volume of numbers.

- If the Union of India cares little for the justice delivery system, it should at least display some concern for litigants, many of whom have to spend a small fortune in litigating in the Supreme Court.

- None of the pious platitudes in the National Litigation Policy have been followed indicating not only the Union of India's lack of concern for the justice delivery system but scant regard for its own National Litigation Policy.

- Nothing has been finalised by the Union of India for the last almost about 8 years and under the garb of ease of doing business, the judiciary is being asked to reform. The boot is really on the other leg.

- To make matters worse, in this appeal, the Union of India has engaged 10 lawyers, including an Additional Solicitor General and a Senior Advocate! This is as per the appearance slip submitted to the Registry of this Court. In other words, the Union of India has created a huge financial liability by engaging so many lawyers for an appeal whose fate can be easily imagined on the basis of existing orders of dismissal in similar cases. Yet the Union of India is increasing its liability and asking the taxpayers to bear an avoidable financial burden for the misadventure. Is any thought being given to this?

- The real question is: When will the Rip Van Winkleism stop and Union of India wake up to its duties and responsibilities to the justice delivery system?

- To say the least, this is an extremely unfortunate situation of unnecessary and avoidable burdening of this Court through frivolous litigation which calls for yet another reminder through the imposition of costs on the Union of India while dismissing this appeal.

- We hope that someday some sense, if not better sense, will prevail on the Union of India with regard to the formulation of a realistic and meaningful National Litigation Policy and what it calls ‘ease of doing business', which can, if faithfully implemented benefit litigants across the country.

This judgement should be circulated among all the tax officers and maybe, Revenue Boards should direct the taxmen to keep these observations in mind before rushing to the courts to file those frivolous appeals.

But then babus don't really have any respect for the courts and litigation will continue merrily.